Just Starting Your Business? Part 1

If you really stopped to consider all that could go wrong with your start-up business, you may never start it at all, and therefore, one of the most common questions we hear is this: “What are the risks I need to consider when I start my business?”

Well, let’s take a look at a few scenarios which illustrate various types of coverage. We’ll try not to scare you too badly.

  • One of your elderly clients is at your place of business and is ready to go home, but she cannot reach her husband to get him to come get her and drive her the 2 miles to her home. You offer to drive her yourself. About halfway to her house, you run a breeze through a YIELD sign, and a delivery truck plows into you on the passenger side. Both you and your client end up in the hospital.
  • Business is booming! You have a steady stream of customers, and you no longer worry day and night about whether or not you will be able to pay the bills. Your bookkeeper, however, has been out sick for 4 days now, and she has no idea when she’ll be back. You have gotten three phone calls today from different vendors, each informing you that you have bounced checks and they want their money. You open the safe and see that the petty cash is empty and the checkbooks are all missing.
  • You have a wine-and-cheese grand opening which is wildly successful! Everyone is abuzz and socializing, and they are all spending money. As the crowd clears out, you get word that a woman — who judging by her grand opening purchases is on track to be a major customer — missed a stop sign on her way home from your fete and hit a child on a bicycle. Furthermore, you are told, she blew a breathalyzer score more than twice the legal limit.

These are just a few of the scenarios which might occur, and which your licensed insurance professional will take into consideration when the two of you decide what coverages you need.

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What Is Needed for Small Businesses?

Just starting, growing and adding your first employees, or changing the operational structure of your business are just a few of the variables involved in what small business insurance your company needs.  Protecting the investment and minimizing risk of loss is crucial and necessary for your business.

There is no legal requirement to have small business insurance in place, however, landlords, financial institutions, and vendors may require proof be submitted.  While not required, it is the prudent and responsible way to operate your business.  It’s also a misconception to think being a corporation or LLC reduces or eliminates the need for insurance.

The first two types of small business insurance are general liability insurance and property insurance.  This type of insurance offers claims of damage and legal costs associated with claims of damage or negligence against your business. Property insurance covers a broad spectrum of loss to company property from fire, smoke, theft, and vandalism to name a few.

A word of caution if you are a home based business, it will still be necessary to add coverage as most home owner’s policies don’t cover business related losses.

If you are an employer, there are some other types of insurance which are required by law.  The first is workers compensation insurance. Coverage varies by state, as do the requirements, but a good rule of thumb is when you have your first employee, let your business insurance agent know.  Unemployment insurance is also required. Your state department of insurance can be a great resource.

A few states require disability insurance. Check with your state department of insurance and your agent to see if your state is one.

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There are many other types of business insurance available to you.  Talk to your agent to determine what options may cover your business needs.

Small Business Liability Insurance: Yes or No?

The question we hear fairly frequently is this: “I’m not mandated to have small business liability insurance. Why should I spend the money on it?”

Far more frequently, we see business owners who do not have this important coverage or simply let it lapse. Usually, this is an attempt on the part of the business owner to save money in a tight budget situation.

In this day and age, and in this business environment, lawsuits are routinely filed over the seemingly most insignificant things, and running your business without liability insurance is like driving to work with your eyes blindfolded!

Trying to defend even the most frivolous lawsuit without this insurance can and does result in the death of a business, or at the very least its bankruptcy.

If you are concerned about the high premiums, don’t let it lapse! Be proactive about lowering the premiums.

Shop around to find the best company to buy it from. Look at exclusions and deductibles. Ask your licensed insurance professional to help you implement a risk management plan. And together the two of you can research your industry to figure out what the average claims and settlements might be and adjust your coverage accordingly.

This is a cost of doing business, and an important one. The importance of this coverage in order to protect your business from risk cannot be overstated.

Business insurance can offer you the peace of mind that your business can withstand a frivolous claim or the settlement.

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The Most Often Missed Component of Small Business Insurance

At some point in time, you took a risk and started a small business.  Through many lean moments, long hours, and perseverance, your business is growing.  You’ve added some employees and now can actually take a vacation again with the family.  But is everything really in good shape?  Could you have missed one of the most serious components of insurance planning, life insurance?

A fact of life is people die, even successful small, medium, and large business owners.  Another real and sad fact is these business owners never thought about what would happen to their business, their employees, and their families if they did.  In fact, they mistakenly believe the business will take care of their family and itself when the reality is that many, many businesses just die along with the owner because of a lack of planning.

You have a lease or a mortgage, capital loans, payroll and other obligations which need to be paid. Do you know what your creditors will actually do should you pass away? You may have some personal life insurance for your family but can your estate be held liable for expenses owed by your business?  Do you have partners or investors in your business?  If you die, can your spouse assume your role in the company?  How quickly?  What will stop your employees from jumping ship and taking clients and even assets with them?  These are scenarios and conversations you need to have now with your insurance professional, attorney, business partners and immediate family.

Every business needs a continuity plan in place funded by life insurance for the owners and investors.  A ‘Buy –Sell Agreement” in place will insure your spouse and family are taken care of and your business will have a far better chance of succeeding.  The Buy-Sell Agreement will purchase the value of your ownership from your spouse while allowing the remaining partners to focus on the day to day operation of the business.  If you’re a sole proprietor, a succession plan will essentially work the same way.  Insuring the obligations are met and your family taken care of through life insurance.  In addition, disability insurance as part of this plan needs to be discussed.  A conversation about key-man insurance is also necessary to help protect the business.

Sit down and have the difficult discussion of developing a succession plan and strategy to put into place in the event of a premature death.  Your licensed insurance professional can show you various scenarios and how to have adequate funds through life insurance to finance these options.

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Small Business Insurance Plans

Insuring your small business is a must to protect the assets of both the business and the owner. Any business will be exposed to a variety of risks. Two major areas of coverage needed are property and liability. Both of these types of coverage and more are available as separate policies or combined in a business owner’s policy.

Business property insurance will cover buildings and contents, and some equipment. Inventory and office furnishing for example will be covered. This coverage will cover for damage from accidents, thefts or fire. It’s important to note that certain property damage from natural disasters like flooding, hurricanes or earthquakes may need separate insurance. It is important to work with your licensed insurance professional to determine what coverage is included and what risk may still exist.

General liability insurance protects the business against a lawsuit for personal injury or property damage. It will cover the cost of the lawsuit as well as damages. No matter how much care is taken, a client can perceive your company did them wrong. One lawsuit and award of damages can financially ruin any size business.

Talk to your insurance professional about combining these insurances if possible into a business owner’s policy, or BOP. In addition, other coverage such as business interruption or crime insurance may be added.

It’s important to understand that professional liability, or errors and omissions insurance is not included. Talk to your licensed insurance professional to determine if you need E & O insurance. Understand what is covered in your business insurance and what is not. Ask specifically for the inclusions and exclusions of your small business insurance. Together, determine the most affordable and comprehensive insurance package for your business.

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Let’s Look At Small Business Insurance Basics

In this day and age of corporate job lay offs, small business start ups are on the rise.  Business insurance is part of the planning that goes into opening a start up company.

It’s normal to have questions regarding the type of coverage your business requires.  Commercial business insurance covers a broad spectrum of protection that includes your property, you and your employees, and your liability. With a start up, it’s possible as the owner you have personal assets on the line.  As you begin to understand and put the pieces together, it is important to remember the ultimate goal is to make sure you are never underinsured or exposed in the event of an incident or disaster.  Let’s look at the basics of small business insurance.

Small business property insurance will cover losses to your building, and the property housed in it.  The computer and phone systems, furniture, finished goods, as well as carpeting, lighting fixtures and supplies will be covered.  There are two options, either actual cash value, which is purchase price less depreciation, or the replacement cost of the item.  Discuss these differences in more detail with your agent.

Business liability insurance must also be in place to protect the business and the owner against lawsuits.  A general liability policy will cover most situations that may arise.  There are specific types of liability coverage for risks not covered within the general liability policy.  An example would be liquor liability insurance which is a separate coverage generally taken out by bars and restaurants.

Ask your licensed insurance professional what else you should be looking at for specialized coverage.  In some cases, a business owner’s policy will combine these two insurance policies for a start up business.  Again, talk to your agent or broker about whether a business owner’s policy may work in your specific situation.

Most businesses are required to have workers compensation insurance if they have employees.  This covers the employee from lost wages while protecting the business against being sued by the employee. Remember, even if you hire family members, they are considered employees.

More specific information is available from the insurance department of your state government as well as your licensed insurance professional.

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Business Insurance for Small Service Businesses

Is business insurance for small service businesses really that expensive?

My phone rang recently, and upon answering it, I was barraged for several minutes about why business insurance was so expensive.

On the other end of the line was an acquaintance who knew I was a business insurance professional. It seems my acquaintance was about to start a medical billing service and shared that fact with a friend who owned a taxi company.

Once she was calmed down, I was able to explain that every business was different. In the case of the taxi company, they were insuring a number of vehicles, a garage, and also had several dozen employees. In no way was this an apples to apples comparison.

We discussed the business insurance options available to our new entrepreneur.

The first part we discussed was that every business is going to have different needs, risk, and exposure. I pointed out that every business needs a combination of liability insurance, property insurance, and workers or employee insurance.

Our discussion included business owner’s policies, additional insurance coverage like errors and omissions, an umbrella policy, boiler and machinery or equipment breakdown coverage, commercial auto insurance and many different options.  As you read this, much like our no longer frantic caller, you’re probably recognizing there are many options available to business owners and all businesses are different.

Work with a licensed insurance professional, let them guide you through the coverage options available to you now, and as your business grows. Make sure you are totally honest with your agent regarding the assets of your business, how much travel will be involved from driving to flying, and a review of any lease you be considering.

Together, you will create an insurance package that not only works for you, but is affordable as well.

Small Business Professional Liability

Many small business owners have typically not worried about professional liability claims.  However, due to the past few years economy, those worries are now increasing.  We are seeing small business sued who in particular rely on web services.  As our technology increases, so do our exposures.  Most business owners are turning to automation to increase their productivity and expand their marketing for business development.  However in doing so, there are increased risks often overlooked.

 

The risks of which I speak include hackers, viruses and other cyber attacks.  Failing to prevent these attacks are costly and time consuming for the business, but also expose their customers to breach of private information.  Business owners are now turning to insurers to help recover some of the money lost due to these conditions only to find it not to be a covered cause of loss under the Business Owner Package policy.  Many professional liability insurance companies exclude certain items also so each policy must be examined closely.  If you have questions regarding your insurance policy, please talk with your agent or one of ours.

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 Commercial Insurance.Net, LLC Advisor is not an attorney, accountant or certified financial planner and makes no representations or warranties to that effect.  Always check with your chosen professional as to statements made in this blog for your particular situation.

 

Understanding Small Business Insurance

Understanding your small business insurance package is critical.

Insuring your business is one of the most important things you will do as a business owner. The peace of mind which comes with having insurance in place to protect your business is very rewarding. What’s just as important, is knowing that your insurance will do what you believe it will.

An important term for you to understand is exclusion. Almost every insurance policy will have exclusions written into them.

For instance, most general liability polices for business exclude professional liability. While the general liability policy is written to cover bodily injury, personal injury and property damage, as well as some types of advertising injury, something is missing. It doesn’t cover claims against professional failure of performance or negligence of professional standard. One lawsuit relating to professional liability can devastate a business.

Professional liability insurance or errors and omissions insurance is needed to protect against this exclusion of coverage.

Another exclusion generally found in a general liability policy is unfair or discriminatory employment practices. This includes hiring and termination claims as well as disciplinary, job title and responsibility changes, and charges of harassment. Again, separate employee practices insurance is needed.

Property insurance will also have exclusions written into them. For instance, flood damages are generally excluded. Other weather disasters such as wind may also be excluded and need separate policies written such as flood insurance. Debris removal and business interruption insurance often aren’t covered.

Take a close look at your commercial business insurance and look for exclusions. If you have any questions, talk to your licensed insurance professional. Have that professional point out exclusions and coverage options available if needed for your business. Then, you are able to really have peace of mind.

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